[responsive][/responsive]The last few years have seen some big changes in the magazine distribution channel, with newsstand sales taking a hit during the recession and some huge players getting out of Dodge. Industry insider John Harrington reminds us that this has been a volatile business for the past two decades.

“The most troubling aspect of the business as 1995 began was the growth of chain retailers and their increasing dissatisfaction with the channel’s rigid structure, which not only dictated their magazine wholesaler supplier, but their profit margins, which were also dictated by the largest magazine publishers,” Harrington writes.

Safeway, in particular, started a retail cascade of events that decimated the 300 wholesalers and the way they competed for business.

“Virtually overnight, magazine wholesaling went from being almost conflict free to a condition of virulent competition. Terms offered to retailers escalated rapidly, and those wholesalers who succeeded in the bidding process did not always consider themselves winners,” Harrington writes.

“The changed wholesaler-retailer relationship precipitated a period of consolidation and concentration among wholesalers, unprecedented in any other industry. Winners, faced with the immediate need to supply magazines to markets where they had no delivery capacities, bought the physical operations of losers. Of course, the terms of those sales did not contain the mutually beneficial characteristics that had been the channel’s norm,” Harrington continues.

By the next year the number of wholesaler companies was down to under 60, notes Harrington. And magazine wholesaling, once a profitable business, became more and more challenging for the remaining companies.

Fast forward 10 years, in the throes of the economic crash, and you have four wholesalers holding 90% of the business in the newsstand channel and fighting to scratch out whatever profitability they can. The next several years brought even more chaos and cutthroat competition.

“Three companies now account for more than 92% of the market: TNG at 65%; Hudson, which since acquired Harrisburg News, is 17%; and Ingram Periodicals, which took over most of SID’s direct business, is now 10%,” Harrington explains. “Each of them is a financially secure entity and they have indicated they are willing to invest in their systems and facilities. Looking at their market footprints, it is a reasonable assumption that the days of destructive competitive strategies are in the past.”

That’s good news, yet the real challenge, Harrington seems to suggest, is for the remaining wholesalers to prove that they are still relevant to media brands.

“The challenge is for TNG, Hudson, and Ingram to demonstrate to and convince these wary suppliers that, in this brave new world of magazine retail distribution that they can provide a stable and viable venue for making retail single copy sales an important element in publishers’ business models.”

The historical perspective is incredibly useful here, and helps make some sense out of the current state of affairs. And a bit of hope for some sanity, soon.